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The notion of distributed knowledge is increasingly often invoked in discussions of economic
organization. In particular, the claim that authority is inefficient as a means of coordination in
the context of distributed knowledge has become widespread. However, very little analysis has
been dedicated to the relation between economic organization and distributed knowledge. In this
paper, we concentrate on the role of authority as a coordination mechanism under conditions of
distributed knowledge, and also briefly discuss other issues of economic organization. We clarify
the meanings of authority and distributed knowledge, and criticize the above claim by arguing
that authority may be a superior mechanism of coordination under distributed knowledge. We
also discuss how distributed knowledge influences the boundaries of firms. Our arguments rely
on insights in problem-solving and on ideas from organizational economics.

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The way in which bounded rationality enters contemporary organizational economics theorizing
is examined. It is argued that, as it is being used, bounded rationality is neither necessary nor
sufficient for producing the results of organizational economics. It is at best a rhetorical device,
used for the purpose of loosely explaining incomplete contracts. However, it is possible to
incorporate much richer notions of bounded rationality, founded on research in cognitive
psychology, and to illuminate the study of economic organization by means of such notions. A
number of examples are provided.

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In the context of an emerging economy, the paper analyzes indigenous growth and internationalization. Using novel and original data, the paper studies the Indian film cluster in Mumbai, Bollywood. It argues that as the world’s biggest commercial film cluster and a conspicuous growth phenomenon in an emerging economy context, Bollywood can be seen as a paradigmatic case for adding to our understanding of the development of film clusters outside the USA, as well as suggesting more general insights into the growth and internationalization of industries in emerging economies. The empirical analysis of the paper points to the importance of home market, government regulation, and industry structure for Bollywood’s recent export growth. The paper discusses how the existence of a well-defined and geographically centered social network among producers, directors and other key roles in filmmaking in Mumbai supports the development of a ‘Bollywood model’ of filmmaking with a industry structure remarkably different from Hollywood’s.

Business people and professionals come together regularly at trade fairs, exhibitions, conventions,
congresses, and conferences. Here, their latest and most advanced findings, inventions and products
are on display to be evaluated by customers and suppliers, as well as by peers and competitors.
Participation in events like these helps firms to identify the current market frontier, take stock of
relative competitive positions and form future plans. Such events exhibit many of the characteristics
ascribed to permanent spatial clusters, albeit in a temporary and intensified form. These short-lived
hotspots of intense knowledge exchange, network building and idea generation can thus be seen as
temporary clusters. The present paper compares temporary clusters with permanent clusters and
other types of inter-firm interactions. If regular participation in temporary clusters can satisfy a
firm’s need to learn through interaction with suppliers, customers, peers and rivals, why is the
phenomenon of permanent spatial clustering of similar and related economic activity so pervasive?
The answer, it is claimed, lies in the restrictions imposed upon economic activity when knowledge and ideas are transformed into valuable products and services. The paper sheds new light on how
interaction among firms in current clusters coincides with knowledge-intensive pipelines between
firms in different regions or clusters. In doing so, it offers a novel way of understanding how interfirm
knowledge relationships are organized spatially and temporally.

Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or “collectivist”) explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations in two related ways. First, we argue that the kind of macro (or "collectivist") explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations - is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.

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The many competing schools of thought concerning themselves with industrial clusters have at
least one thing in common: they all agree that clusters are real life phenomena characterized by
the co-localization of separate economic entities, which are in some sense related, but not joined
together by any common ownership or management. So hierarchies they are certainly not.
Yet, it is usually taken for granted that clusters, almost regardless of how they are defined, all
expatriate the 'swollen middle' of various hybrid 'forms of long-term contracting, reciprocal
trading, regulation, franchising and the like' residing somewhere between hierarchies and
markets. This fundamental (but usually implicit) assumption would, perhaps, be justified if
markets could be reduced to events of exchange of property rights, between large numbers of
price-taking anonymous buyers and sellers supplied with perfect information as they are
commonly conceived in mainstream economics. One of the original attractions of Neoclassical
price theory was precisely that it promised a way of analysing the economy in general and
market exchange in particular independently of specific institutional settings.
However, introducing transaction costs as more than fees paid to intermediaries leads inevitably
to comparative institutional analysis and, not to be forgotten, to the perception of markets as
institutions with specific characteristics of their own. Some sets of characteristics are so common
that they represent a specific market organization or market form. The cluster is one such
specific market organization that is structured along territorial lines because this enables the
building of a set of institutions that are helpful in conducting certain kinds of economic
activities.

This paper addresses an issue of great importance for the future organization of the consumer
electronics industry: the "battle" of control over component-based digitization. We are now
witnessing the dismantling of the Japanese Model that has prevailed in consumer electronics
over the past 30 years. Specialized and large-scale component suppliers have taken the lead in
most component-based innovations and have obtained increasingly powerful positions in the
value chain of consumer electronics. This paper provides an in-depth study of the strategic and
structural ramifications of one such component-based innovation, the current transformation of
sound amplification from conventional to digital amplifiers. We study the early formation of this
new technology as especially reflected in the particularly dynamic cluster of innovation in
Denmark and extend the analysis to the global strategizing around this new technology. A
framework is developed to explain the reluctance of most of the large consumer electronics
giants in developing/adopting this new technology.
Key words: Consumer electronics, Industrial dynamics, Open Innovation
JEL Codes: L6, L68, O32

The paper investigates the relationship between human capital characteristics and firm performance
in engineering consulting. Because general experience, firm-specific human capital and diversity
carry specific costs and benefits we hypothesize curvilinear (taking inverted U-shapes) relations to
firm performance. We find little effect of general experience and firm-specific human capital, but
the findings give some support for the curvilinear relation between performance and human capital
diversity.

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While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use measures of economic freedom from the Economic Freedom of the World database to examine which elements of economic policy making and the institutional framework are responsible for the supply of entrepreneurship Our data on entrepreneurship are derived from the Global Entrepreneurship Monitor. The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

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I critically discuss recent claims about economic organization in the emerging
“knowledge economy,” specifically that authority relations will tend to disappear
(or at least become radically transformed), the boundaries of the firm will blur,
and coordination mechanisms will be much more malleable than assumed in
organizational economics, resulting in various “new organizational forms.” In
particular, the price mechanism will be used inside hierarchies to a much greater
extent. In order to obtain an analytical focus on the knowledge economy, I
assume that it may be approximated by “Hayekian settings” (after Hayek 1945),
that is, settings in which knowledge is distributed and where knowledge inputs
are relatively more important in production than physical capital inputs. I then
argue, drawing on organizational economics as well as Mises’ insights in
property rights and comparative systems, that the presence of Hayekian settings
does not mean that authority will disappear, etc., although economic
organization will in fact be affected by the emergence of the knowledge
economy. This suggests that Austrian economics has an important contribution
to make to the study of economic organization.